The Inevitable Grexit and Banking Collapse
Dimitri Lascaris Report: while the credibility of Prime Minister Alexis Tsipras hangs by a thread, 15 out of 18 European governments support ousting Greece from the Eurozone
SHARMINI PERIES, EXEC. PRODUCER, TRNN: This is the Dimitri Lascaris Report on the Real News Network. I’m Sharmini Peries coming to you from Baltimore.
Greece is running out of money. The banks remain shut, and the ATMs, if they have money, can only [suspend] 60 Euros. In spite of the resounding no vote to the Euro Troika austerity plans, prime minister of Greece Alexis Tsipras has asked for another three-year loan from Europe’s bailout fund in a final effort to prevent Greece from getting kicked out of the Eurozone.
To explain all of this I’m joined by Dimitri Lascaris. Dimitri is a partner with the Canadian law firm Siskinds, where he heads the firm’s securities class action practice. He’s a board member of the Real News Network and has been covering Greece and analyzing Greece for us here.
Dimitri, thank you so much for joining us.
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER IN CANADA: Thanks, Sharmini.
PERIES: So Dimitri, another deadline has been set for Sunday. Explain what that is, and why Greece is in this situation once again.
LASCARIS: Well, the deadline has been effectively set by the European Central Bank. As of, I think it’s midnight on Sunday, if there isn’t a deal, at least one in principle with the other members of the Eurozone, Greece’s creditors outside of the Eurozone–principally the IMF then, the ECB says it will withdraw liquidity assistance for the Greek banking system which will certainly precipitate a collapse of the banking system. Right now the banks are closed but they’re dispensing money, sporadically, at least, up to a maximum of 60 Euros for each of their domestic clients. But if the banking system collapses, there isn’t going to be any dispensation of money.
So this is quite serious, and will take the crisis to an entirely new level.
PERIES: Dimitri, there’s a lot of focus on the Syriza leadership and the European Union and the Troika, and the negotiations. Very little attention is being paid to, at least in the international media, what’s really going on inside the government and what’s happening in Greece in parliament. Explain what you know so far.
LASCARIS: Well when you and I last spoke, the major development within the government–this was very shortly after the resounding oxhi vote was delivered by the Greek people, was the resignation of the finance minister Yanis Varoufakis. And you and I talked about the possible reasons for that. I indicated I had my own theories, but all of them were kind of tentative.
A new theory has emerged from somebody who’s I think got insights into what is happening within the Syriza leadership that many of us don’t. It’s Paul Mason of Channel 4 news. And he expressed the view–and he, by the way, interviewed Yanis Varoufakis several times in the last few weeks. He expressed he view that the reason why the ex-finance minister resigned was because he realized or felt that the leadership of the party was about to enter into a compromise with the Eurozone which was not one that he could support in good conscience, and so he left the government.
This is a credible theory I have to say, because at the same time he, that Minister, ex-Minister of Finance Varoufakis resigned, Tsipras, Alexis Tsipras the prime minister convened a meeting of other party leaders including the neoliberal party New Democracy. Another neoliberal party To Potami, which characterizes itself as a centrist or central-left party. It isn’t. And the so-called socialist party, which is clearly a neoliberal party at this stage, PASOK. And a statement emerged from that, a statement of national unity, although I don’t think this can fairly be described at this stage as a national unity government.
And what I thought was most striking about this statement was its very tepid determination to achieve some level of debt restructuring. Rather than say collectively, these party leaders, we are not going to do a deal that does not include a binding commitment to dramatic debt reduction, which is exactly what Greece requires and everybody knows it, what they said was they wanted, it was really a plea, not a demand. A plea for Greece’s creditors to enter into discussions at some stage in the future about some form of debt restructuring.
This was essentially on the table before, the possibility at some point in the future of having a discussion about debt relief. It was always there. So if the intention of the government is to achieve is to achieve nothing more than an austerity, an extension of the austerity regime coupled with some sort of non-binding commitment to have a chat about debt relief at some stage, that I, I have to say would amount to a very clear betrayal of the will of the Greek people.
When this initially happened, when Tsipras convened a meeting of other party leaders, the mainstream press interpreted this as an attempt on his part to shield himself from regime change. The thought seemed to be that if he had the leaders of those parties that I mentioned standing side-by-side with him that there would be no effective means by which he could be deposed by the creditors. I think now in retrospect the more likely or plausible explanation is that by entering into a loose, [indeed] a fragile alliance with these parties, what Tsipras is aiming to do and what he may accomplish at the end of the day is to isolate the left wing of Syriza, which will have nothing to do with further austerity and will be insistent upon meaningful debt relief. Because if he can rely upon the support of those parties to, in respect of any deal that he happens to strike with the Troika between now and the weekend, then he doesn’t need the support of his leftist wing.
Regrettably that seems to be where we’re heading. The big wildcard, I have to say, is going to be how Greeks will respond to this. They were threatened with all manner of devastation and destruction in the leadup to the referendum, and to their credit–I mean, this is really a victory of the Greek people. It’s not a victory of Alexis Tsipras, it’s not the victory of any political party in Greece. It’s the victory of the Greek people. They stood up to those threats. They resoundingly said now. And if they do what Angela Merkel is now demanding, which is that they accept terms that are even harsher, austerity terms that are even harsher than those that were rejected by the Greek electorate, I think there’s a big question about how much patience the Greek people are going to show for that.
PERIES: So what’s really at stake here, what is Syriza trying to prevent here? Being forced out of the Eurozone, obviously, but what does this mean in terms of their leadership credibility and ability to govern there?
LASCARIS: Well, I think after having called that referendum–I mean, there was, there was a report by Ambrose Evans Pritchard of the Telegraph in the UK that Tsipras was depressed on the day after the referendum because he had expected to lose, and in fact wanted to lose. And this had placed him in a bind. He wanted to have a democratic mandate to enter into an agreement for further austerity, and arguably even harsher austerity than anything Greece has had to endure thus far.
So I think his credibility at this stage is really hanging by a thread. And I’m hopeful that he will summon the courage to stand up to the Troika, but that will mean at this stage, it appears, an exit from the Eurozone. The reports are that 15 out of 18 governments support, in the European Union, currently support in some form Greece’s exit from the Eurozone. They seem prepared, at least some of them, to have a discussion about doing that in an orderly manner. In a minimally humane manner. But there is very little appetite amongst the EU governments for Greece’s continued participation in the Euro.
And as I’ve said many times, this is an extraordinarily complicated and challenging task, to transition to another currency. It’s something that he has to be preparing for, the entire leadership of Syriza has to be mobilized for this eventuality. Rather than do that, Alexis Tsipras today went to Strasbourg and the European parliament, and engaged in a fairly unseemly bout of mudslinging with some of the neoliberal leaders within Parliament, including Manfred Weber, a German politician who leads the neoliberal European People’s party. And he was essentially admonishing Tsipras to disavow critical statements that ex-finance minister Varoufakis had made about Eurozone leaders, in particular his claim that they were terrorists. Gus, Guy Verhofstadt, another neoliberal party within Europe condemned Tsipras’ approach to the crisis and said, you know, it’s time for him to prove himself to be a true reformer. And of course in the language of European neoliberalism, reform means vicious austerity.
This is what happened today. He spent an entire day basically being tongue-lashed by people who in normal circumstances should be showing a great deal of respect to the prime minister of a sovereign state within the Eurozone. But they were treating him like a schoolboy. And this is not what he should have been doing today, frankly. He should have been with his closest advisors in his cabinet, preparing for the eventuality of Grexit, because it appears very much that the political will within the leadership of the Eurozone at this moment is to push Greece out.
PERIES: And if Greece is kicked out, again, Alexis Tsipras is in a situation of not being able to manage the situation at home because he’s not actually preparing for what a default might look like at home.
LASCARIS: That does appear to be the case, regrettably. I think the writing is on the wall. The most–everybody who is a keen observer of the situation–I mean, you can seen bank analysts are now saying it, and they’re loathe to say this sort of thing, that a Grexit seems likely.
You know, as I said, 15 out of 18 EU governments in some form seem to support a Grexit. So the likelihood at this stage is, in fact, a Grexit, whatever the leadership of Syriza may or may not want. So that is something that requires intensive preparation, and they seem to be clinging even to this very day to the delusion that Greece’s continued membership in the Eurozone is both practicable and in the best interests of the country in a long-term basis.
PERIES: And my last question to you, Dimitri. Is there another example we can look at on a country that has defaulted and managed to survive that could be useful in this case?
LASCARIS: Certainly. The one that often comes to mind is Argentina. Argentina defaulted on its debt and abandoned its peg to the U.S. dollar. Effectively was using the U.S. dollar as its currency in 2001 or thereabouts. And there was significant social unrest and economic hardship for a period of time suffered by the people of Argentina. But in the years following that transition, Argentina experienced very considerable growth. In fact, I believe it was the, in terms of economic growth for a number of years following the default, it was the leader within South America during a time in which there was quite impressive growth amongst other South American states.
Now, that’s not to say that Greece is Argentina. There are obviously significant differences between the two countries. And one cannot say with a high level of confidence that Greece will have a similar experience. But the alternative being presented to Greece at this moment is one of endless, grinding depression. With the youth of the country, in whom the country, the government, has invested significantly in the education system fleeing en masse. The country has no future at this stage. At least with the drachma or some other sovereign currency it will have a greater degree of control over its destiny than it currently has and could possibly have with the Eurozone.
PERIES: Dimitri, I thank you so much for joining us. And we look forward to your ongoing updates. Have a good evening.
LASCARIS: You too, Sharmini.
PERIES: And thank you for joining us on the Real News Network.
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